“This Thing is gaining steam.” – Can Exxon Adapt to a Carbon Tax?

November 15, 2012

Exxon/Mobil CEO famously declared last summer (see above) that, while the company no longer denies the basic science of climate change, human beings were very flexible, and in the case of extreme climate impacts, “..we’ll adapt to that.”

Today Bloomberg reports that Exxon might find a way to adapt to a carbon tax. Is this further evidence of a changing climate that could melt climate denial in Washington?

Exxon Mobil Corp. (XOM) is part of a growing coalition backing a carbon tax as an alternative to costly regulation, giving newfound prominence to an idea once anathema in Washington.

Conservative economists and fossil-fuel lobbyists united in 2009 to fend off climate-change legislation that would have established a cap-and-trade mechanism. They are now locked in a backroom debate over a tax on carbon-dioxide emissions that could raise an estimated $100 billion in its first year.

A carbon tax would force electricity producers, refiners and manufacturers to pay a fee for the greenhouse gases they emit. It is gaining interest as lawmakers and President Barack Obama pledge to simplify the corporate tax code and try to raise revenue to narrow the deficit. The devastation from superstorm Sandy following the wildfires and drought of this summer have also increased concern about global warming.

“It does fit with the Republican idea of cleaning up the tax code, and to have a clean instrument for addressing this problem,” John Reilly, co-director of the Massachusetts Institute of Technology’s Joint Program on the Science and Policy of Global Change, said in an interview. Given this year’s weather disasters, “it’s hard to stand up and say global warming is a hoax,” he said.

Gilbert E. Metcalf, deputy assistant treasury secretary for environment and energy, said this week that the administration wasn’t planning to propose a carbon tax though it could be “part of the mix” of a tax overhaul, according to The Hill newspaper. Asked about it yesterday, Obama said he doubted there was enough political agreement for the tax, though he warned against delay in combating global warming.

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The Washington-based American Enterprise Institute, which says it advocates libertarian and conservative values, held a full-day discussion Nov. 13 to examine how best to implement a carbon tax, which its economists say could enable a cut in corporate taxes and head off regulation by the Environmental Protection Agency. The same day, an opponent of the idea, the Competitive Enterprise Institute, filed a lawsuit against the Treasury Department, seeking private e-mails it said would show the administration is secretly pushing for a carbon tax.

“They need new sources of revenues, and this is a beautiful one,” Chris Horner, a senior fellow at the Washington-based CEI, said in an interview. “This thing is gaining steam.”

“Combined with further advances in energy efficiency and new technologies spurred by market innovation, a well-designed carbon tax could play a significant role in addressing the challenge of rising emissions,” Kimberly Brasington, a spokeswoman for the company, said in an e-mail. “A carbon tax should be made revenue neutral via tax offsets in other areas,” she added.

Exxon’s political action committee gave nearly $1.2 million to political candidates in the past two years, 93 percent of it to Republicans, according to the Center for Responsive Politics.

Exxon is the biggest U.S. natural-gas producer. A carbon tax could boost demand for natural gas in U.S. power plants, as gas emits half the carbon dioxide as coal when burned to make electricity.

“The source hit hardest is coal,” David Kreutzer, a research fellow in energy economics at the Heritage Foundation in Washington who opposes the tax, said in an interview. “The biggest substitution for coal is going to be natural gas.”

Taxing greenhouse-gas emissions would help finance an overhaul of the convoluted corporate tax code and is a better way to address global warming than regulations from the EPA, according to Aparna Mathur, an economist at the American Enterprise Institute who hosted yesterday’s forum.

6 Responses to ““This Thing is gaining steam.” – Can Exxon Adapt to a Carbon Tax?”

Our fossil fuel cabal managed to get themselves involved in direct compensation, programmes to buy back and close the most poluting brown coal power stations and ‘export exposed’ industries get massive gifts of CO2 credits.

Of course our coal mining companies are free to dig up and export as much as they want.

In Australia, while we have the highest per captia CO2 emissions, our gross CO2 emissions are “low”.

The mistake we have made is involving the fossil fuel industry, thinking it has some part to play in the future. I personally think they’ve had a decade of warning, and haven’t changed their business practice at all.

When I hear Rex Tillerson’s words in the video above, I find myself asking a simple question: why should the whole human race have to ‘adapt’ to climate change just so energy companies don’t have to adapt to a carbon tax?

Or does Mr Tillerson think energy companies like Exxon are more important than all the rest of us put together? We can adapt, but they shouldn’t have to…

The bottom line is if Exxon is in the forefront on calling for a carbon tax, it’s because they see a competitive advantage in it – likely either by reducing their cumulative tax load or by boosting their natural gas sector.

While I am not opposed to a Carbon Tax, I think it is wise for all G8 (and eventually G20) nations to get together and agree on three things: 1) governments must eliminate subsidies for all fossil fuel industries (This includes making them pay all their taxes and royalties). 2) Fossil fuels arriving from non-compliant countries will need to paying import tariffs (no free trade). 3) governments must all agree that corporations must pay a minimum business tax. This last rule will prevent companies from jumping to countries where they can circumvent their financial and environmental responsibilities. To see an example of this going wrong in the USA, look at the number of California-headquartered corporations that relocated to Texas just to avoid paying state taxes. How can Texas do this? They already make so much money from oil that they don’t require other corporations to pay any taxes at all. While this translates into tax-paying jobs for Texans, it only brings unemployment and red-ink for states on the other end of the problem.